$30 billion GE-Baker Hughes deal may come Monday

DanaCimilluca

General Electric Co. is nearing a roughly $30 billion deal to combine its oil and gas business with Baker Hughes Inc., creating an energy powerhouse that would give GE a cost-effective way to play any recovery in the industry.

GE plans to contribute its oil and gas business and some cash to the new entity, which would have publicly traded shares and be controlled by GE, according to people familiar with the matter. The transaction is to be announced Monday morning, the people said.

Baker Hughes on Friday confirmed it is in discussions with GE, a day after The Wall Street Journal reported the companies were in talks about a potential transaction. A GE spokeswoman said Thursday the company was pursuing "potential partnerships" with Baker Hughes, but GE wasn't exploring an "outright purchase." The companies had no immediate comment Sunday night.

A combination could create a company with more than $25 billion in revenue that could cut costs to better compete with rivals such as Schlumberger Ltd. to provide equipment and services to oil rigs and wells. It would enable GE to benefit from an expected recovery in the industry without having to splash out for a full acquisition of Baker Hughes.

After two brutal years, GE and some of its rivals in the oil and gas business have begun to see signs of hope. Crude prices, which plunged from more than $100 a barrel in 2014 to $30 earlier this year, have rebounded to around $50 recently.

Recently, GE also provided glimmers of improvement from the third quarter, noting that U.S. rig and well counts remained down 50% from the previous year but had ticked upward in the previous three months. Still, orders for services were down across all of GE's oil business, the company said.

In recent public comments, GE has said it is still committed to the oil and gas unit for the long term, but GE says operating profit in the unit will be down by 30% for the year. GE is cutting more than $1 billion in costs out of the company over two years.

The companies' shares have reacted well to the possibility of a deal. GE's shares ended 2.1% higher at $29.22 on Friday, while Baker Hughes shot up 8.4% to $59.12.

Ted Mann contributed to this article.

Write to Dana Cimilluca at dana.cimilluca@wsj.com, Dana Mattioli at dana.mattioli@wsj.com and David Benoit at david.benoit@wsj.com

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